Traders seek immediate resolution to dilemma over VAT cut

Iron and steel traders in Punjab today said they will move court if the government does not immediately address the issues arising out of a reduction in value added tax.
In a new notification, the Punjab Excise and Taxation Department has reduced VAT on all iron and steel items from 4.50 per cent to 2.50 per cent (plus 10 per cent surcharge).
The new tax rate will come in to effect from February 2014.
However, it has also announced that the input tax credit (ITC) on stock held as on January 31, 2014 would be restricted to 2.50 per cent.

Input tax credit enables a registered dealer to adjust the amount of tax paid on input against tax paid on output or sale.
"How can state government give us input tax credit of 2.50 per cent when we have paid 4.50 per cent tax on purchase of iron and steel items. It is a totally illegal and an anti-trade move.

"Traders who have stocked these items will suffer a loss of 2 per cent," the Federation of Association of Small Industries (India) President Badish Jindal said today.
Describing the move as "anti-trade", dealers have asked the state government to either refund the balance of tax paid or ensure it is adjusted in future tax payments.

"We will approach the Punjab High Court next week if the state government does not reverse this move," he said.